Australia employment unexpectedly slides

Sydney, Australia reported a surprising decline in employment for September, according to recent data. The unemployment rate remained at a five-year high, prompting investors to reduce their expectations of another interest rate hike. The Reserve Bank of Australia (RBA) is now seen as almost certain to keep interest rates at 4.6 percent in November, up from previous odds of 66 percent.

The probability of a rate change in December has dropped to just 31 percent, with further increases no longer factored in. The Australian dollar weakened slightly against the US dollar, while three-year government bond futures increased. Shockingly, net employment decreased by 39,300 in September, the largest monthly drop since February of the previous year.

This was largely driven by a significant fall in part-time jobs. The unemployment rate remained unchanged at 4.7 percent, up from a previously revised 4.6 percent. The participation rate fell to 66.8 percent, while hours worked increased by a minimal 0.1 percent. Underemployment also rose to 6.3 percent. Economists believe the increase in unemployment provides the RBA with more time to monitor inflation data before potentially raising rates again.

They predict unemployment will continue to rise in 2027, possibly surpassing 4.8 percent due to lingering effects of oil price shocks and tighter monetary policy. Despite caution advised by the RBA about interpreting monthly jobs data due to recent changes in the survey methodology, they still expect labor market stability based on job advertisements.

The central bank has raised interest rates four times this year to combat inflation, but both annual and core inflation rates remain above their target range.